Crypto market in Africa: From transactions to storing and multiplying value

The African crypto market is in a very unique position in 2021. With a high proportion of the unbanked population, staggering inflation, cryptocurrencies are a safe haven for both remittance transfers and more long-term products, like investing. But if the former was already very popular in the previous years due to market peculiarities, the latter has started the acceleration with a boost by the pandemic times. And those who invested in bitcoin in 2020 have already made over 550% profits.

What makes Africa one of the most promising regions for the crypto market

In the report “The State of Crypto Africa”, market analysts call Africa “one of, if not the most promising region for the adoption of cryptocurrencies”. And they are not the only ones. Jack Dorsey, the CEO of Twitter and Square, went even further and shared that “Africa will define the future” of the whole crypto industry.

At the same time, current transactional volumes in Africa are tiny: while the African continent accounts for about 15% of the global population (1.216 billion out of 7.9 billion), the value transacted in cryptocurrencies is only 2% of the global value, according to the Chainalysis. It basically makes the African cryptocurrency economy the smallest. So why do both crypto market experts and traditional tech market gurus take note of its perspectives?

The Arcane Research experts state that the reasons can be assigned to “the unique combination of economic and demographic trends”. And in many ways, they are right on the mark. In Africa, according to different estimates, from 57% to 66% of the population has no bank account.

The lack of the established banking traditions made quite a path for fintech companies that promoted digital channels and alternative solutions. While citizens are basically forced to look for alternatives due to the lack of applicable products, they also demonstrate one of the greatest adoption rates when it comes to the newest financial instruments. In Africa, even in the most remote villages in Kenya, people are no strangers to e-payments and digital wallets.

The marketing director of the international crypto community Roy Club Sergey Ordin has himself witnessed in local representative offices of the community, that African people have absolutely “no problems with mastering new technologies”, especially among young generations, who are also eager to find alternative “ways to financial independence”.

The Roy Club’s local statistics prove that once again: since its opening in 2021, the number of local participants has already struck 15% out of all global members (approximately 100,000 out of 700,000 club members).

Crypto: from a niche product to assisting in making a living

Given the lack of banking traditions and the high rate of adoption of new technologies, no wonder the African citizens quickly noticed the benefits of cryptocurrencies. The first mass application was in the field of remittance payments. In 2020, traditional institutions offered up to 8.9% for cross-border transactions, according to the World Bank. It makes the African continent the most expensive for remittance transactions, with the world average being 6.8%. Therefore, no wonder that cheap and instant transfers were the first niche for cryptocurrencies to occupy in Africa.

But 2021 accelerated the growth of seeing crypto not only as a means of transferring value but a means of storing and multiplying it. The pandemic surprised African citizens with even more economic troubles: growing unemployment rates, an economic crisis with the devaluation of local currencies etc. It forced people to look for alternatives to just stay out of poverty. Being well-versed in digital instruments definitely helps in such times. That made room for a new trend of using cryptocurrencies as an investment. Nena Nwachukwu, the regional manager in Nigeria at Paxful, also confirmed that this trend goes beyond individuals to businesses: “With devaluation and recession causing Naira depreciation, individuals and even businesses are looking to hedge the value of their funds using a good investment tool”

The business case is very clear. If we take Nigeria as an example, the inflation this year was about 17%, according to the National Bureau of Statistics/ The price of bitcoin in March 20202 was $6500 and in March 2020 was $60,000. It was the choice between 17% loss and 900% profit.

Despite the wonders that bitcoin price fluctuations can do, it is hard to make a sustainable middle or short-term investment strategy out of it, especially now, when the bulls are slowing down. That is why more and more people in Africa opt for alternative investment mechanisms like staking. Staking is the way of getting profits out of owning cryptocurrencies that work on the Proof-of-Work algorithms. It is the same as mining, in a sense that users pool their resources to perform crucial network functions, like, for example, validating the transactions.  But in comparison with mining, staking does not require highly expensive equipment or specific knowledge.

Moreover, in Africa, there is already an infrastructure for pooling the resources together, like for example, the staking pools of the Roy club. According to Sergey Ordin, the Roy Club marketing director, the members of the staking pool UMI can achieve a monthly profit from 5% (for pools with 50,000 UMI) to 40% (for pools with 1,000,000,000 UMI).

Generally speaking, as Buchi Okoro, the CEO of the African crypto exchange, puts it, a high proportion of the users in Africa use crypto instruments “to earn a living”. That is why the adoption rates are stunning, coupled with a very high interest in free educational products, like the Roy School and Roy Academy.  The combination of all these factors makes Africa indeed one of the most promising lands for crypto adoption.

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